California Fires Opening Shot Against Bitcoin, Threatens Felony Charges
June 24, 2013 3:53 PM
comment(s) - last by
State and federal authorities wage indirect war against cryptocurrency
the Bitcoin Foundation
-- the organization charged with promoting
the popular cryptocurrency
-- was deciding where to hold its May "
Future of Payments
" conference, it decided California seemed a natural pick. After all, the state was often known for its
and it was home to
much of America's high-tech leadership
But according to
, Californian authorities have seized the conference -- held in San Jose -- as an opportunity to come down hard on the cryptocurrency.
California's Department of Financial Institutions
sent a cease-and-desist letter for "allegedly engaging in the business of money transmission without a license or proper authorization."
CA State Cease and Desist May 30
How exactly Bitcoin ran afoul of this provision -- which is covered under federal Money Laundering Act of 1996 (
31 USC § 5330
) -- is unclear. The law states:
Any person who owns or controls a money transmitting business shall register the business (whether or not the business is licensed as a money transmitting business in any State) with the Secretary of the Treasury....
Two "speakers" engage the audience at the Future of Payments conference.
It's possible this all has to do with the
world's largest Bitcoin exchange
-- Mt. Gox -- whose partner Mutum Sigillum
U.S. Department of Homeland Security
investigation, for failing to register (under the aforementioned provisions) as a money exchanger with the
U.S. Department of Treasury
. Mutum Sigillum was operating its exchange business out of a
account (which was housed in Dwolla's financial institution partner, Veridian Credit Union), according the seizure warrant.
The issue is a serious one for Mt. Gox. If the exchange loses its American partner, it will be left without a direct route to exchange U.S. dollars to Bitcoins. And as foreign governments engage in similar crackdowns, the routes to funnel real world currency into Bitcoin dwindle.
Back to the California crackdown, the Bitcoin Foundation's leaders should already have responded to the May 30 letter, under its 20 day response period. Failure to respond can result in fines between $1,000 USD and $2,500 USD per day, plus potential prison time.
It's unclear what actions (if any) they took, but Jon Matonis, a member of the Bitcoin Foundation's Board of Directors, wrote in a commentary in
One activity that the foundation does not engage in is the owning, controlling, or conducting of money transmission business. Furthermore, that activity would also be against the original charter of the foundation. As general counsel for the Bitcoin Foundation, Patrick Murck has lead responsibility for corresponding with the California Department of Financial Institutions.
At this stage, it’s difficult to tell whether or not it was a general blanket action and if other bitcoin-related entities received cease and desist letters from California. If Bitcoin Foundation was not the only recipient, then expect other companies to come forward in the days and weeks ahead.
Federal and state governments have a couple reasons to crack down on Bitcoins. While the digital currency is not fully anonymous (due in part to loss of anonymity when spending) and formally should be taxed, it's harder in practice to track than standard currency, making it
somewhat safer to dodge taxes
or buy illegal goods. Second, Bitcoin is
outside the realm of nation-states' fiscal policy control
, hence it interferes with trade barriers and other instruments that a nation-state might wish to enact.
So far the U.S. has not passed any laws that would
make Bitcoins or other digital currencies
. But as use grows, don't be surprised to see efforts to put a more direct ban in place pop up.
Californian State Gov't [via Scribd]
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6/24/2013 4:13:46 PM
They failed to recognize that modern American liberalism is based on "take from those who work in order to give it to those who refuse to".
Since there is no way for them to tax, earn revenue from, or "take what they feel is theirs", then they file the lawsuits and complaints hoping to force them into paying up their "fair share" of taxes.
Instead you can bet they will leave CA for another state like TX or FL.
6/25/2013 4:11:03 AM
I'm no expert in Californian politics, but your opinions seem to be misplaced in reference to the topic at hand. The owners of Bitcoins are exactly the "people who refuse to work".
The whole concept of this currency is to generate money by doing something utterly useless (wasting electricity), in the hopes of later exchanging this money for the produce or service of a person that is willing to do usefull work.
I understand the problems with the current system of money that the bitcoin inventors want to protest, but the Bitcoin is the worst solution imaginable. And in a perfect world, the bitcoin would never have achieved any relevant exchange rate. But of course with the total over-accumulation of money by the "1%", money will be invested in absolutely everything, no matter how absurd it is. Thus the people who now have caused a high exchange rate between bitcoin and dollar are exactly the people that have profited most from the already existing monetary system.
6/25/2013 7:52:57 AM
That may have been the origin of Bitcoin, but I doubt that it's the only holders of this "currency" now. There's been too much governmental investigation going on recently, and it wouldn't surprise me if there's been some organized crime investment into Bitcoin, most likely for money laundering purposes.
But yeah, it probably still has something to do with the fact that California can't figure out how to tax them!
6/25/2013 12:27:11 PM
What a great way to funnel money into (or out of) places like Iran or North Korea, or to terrorist organizations, without fear of being found out!
6/26/2013 2:13:30 PM
Look, I know you don't like taxes (let's be real- most people, including liberals, don't), taxation is a necessary part of the social contract especially in a market driven economy. I'm going to ask/suggest that you stop being willfully ignorant of this reality just so you can bash liberals.
As for this "take from those who work/give to those who don't" philosophy, I can identify liberals and conservatives who believe in this idea. The difference is, liberals stereotypically give a little to the lower class who don't work class while conservatives stereotypically give a lot to the upper class who don't work (note my use of the word stereotypically). So if you want to operate from the stereotype- then honestly, I'd rather be on the liberal side of things.
But if yo want to have a real discussion- let's discuss what government should be offering as a service as part of the social contract and dump this stereotypical thinking. The truth is, things like corporate welfare, social welfare, roads/other infrastructure, domestic security (police/FBI), international security (military, CIA) are all government services and require taxes to run. The real question is which ones are worthwhile for the government to run and which should we leave to market forces.
If you think about things from this perspective, then there is no reason why bitcoin should escape taxation. At this point, they're trying to take advantage of the market that our society built (and government is a necessary part of that society, also contributed in a positive way) without being subject to key portions of the social contract that make it possible.
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